Stockpiling Will Add to GDP’s Growth

Open the warehouses and dust off the shelves. Companies are laying in more goods and supplies. Faster inventory accumulation will provide a boost to gross domestic product growth this quarter.

Renewed interest in inventory-building is a key take-away from the two industrial surveys by the Institute for Supply Management. Companies are adding to their stockpiles this quarter and, importantly, the accumulation is a response to more orders coming in. Both trends are good signs for the economic outlook.

The ISM factory survey out last week showed manufacturers added to inventories in the first two months of this quarter, after drawing down stockpiles in the fourth quarter. Indeed, a sharp downshifting in inventory gains across all economic sectors knocked 1.55 percentage points from GDP growth last quarter.